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World’s Best Banks 2012: Latin America

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With its developing middle class, the region’s growing consumer sector helped banks to continue posting healthy returns last year. Banking sector assets and profits were up throughout the region, compared with the previous year, providing further signs of a full recovery from the 2008 global financial crisis.

The region’s banks successfully pursued unbanked population segments that are increasingly requiring financial services. Also contributing to the ongoing recovery were increased credit availability, lower interest rates, booming trade sectors and greater banking sector efficiency ratios. However, while Latin American banks managed to evade much of the fallout from the eurozone debt crisis, some analysts warn that stagnant economic growth in Europe and the US, coupled with a slowdown in China, could still have an impact. The region’s economies, though, are well positioned to withstand a global slump.

European banks in the region posted strong revenue growth, despite weakness at home, which led some to shed Latin American assets to improve liquidity. The UN Economic Commission on Latin America and the Caribbean predicts the region will see overall growth drop from 4.3% in 2011 to 3.7% in 2012.

REGIONAL WINNER

Santander

Strong profits throughout its Latin American network again helped Santander, the eurozone’s largest bank by market value, offset hefty declines on the home front. Despite a 34.6% year-on-year plunge in the bank’s overall attributable profit in 2011, Latin American operations contributed 51% of the group’s profits. Brazil alone contributed 28% of profits, and Mexican operations reported profit growth attributable to local operations of 40.9%. Santander sold its Colombian banking operations for $1.2 billion in 2011 and decided to sell a share of its Chilean business, in moves the bank says were aimed at increasing shareholder value. Yet the bank increased its employees in the region by 2.6%—to nearly 92,000—and boosted its branch network by 2.8%, to 6,046. It also boosted lending by 18% year-on-year. Santander entered into a strategic alliance with insurer Zurich to jointly develop business in the region, leading to a €641 million ($840 million) capital gain in 2011. The bank remains committed to its social programs in the region, announcing plans to grant 18,000 scholarships to Latin American students over the next five years. Santander continues to gain the loyalty of Latin American customers, with surveys showing strong customer satisfaction ratings, which reached a record 95.6% in Mexico.

Banco Macro has always placed its bets on Argentina’s fast-growing interior markets to drive profits. The bets have paid off well, with $270.1 million in net income and $9.5 billion in total assets in 2011. The bank is the exclusive financial agent for four rural provinces, and 80% of its 414 branches are located outside the Buenos Aires metropolitan area. Yet Macro now plans to increase its market share in Buenos Aires as well. The bank boosted private sector loans by 52% in 2011, when 97% of its corporate clients were small and medium-size enterprises. Of its 2.8 million retail clients, most are in the low-and middle-income brackets. In 2011, transactions using automated channels rose 32% year-on-year, to 8.9 million per month.

Despite Barbados’s stagnant economy in 2011—1% GDP growth and 12% unemployment dampened credit demand—Scotiabank celebrated its 55th anniversary in the country with favorable results. It held a 31.7% share of the lending market, including a dominant 38% share of the credit card market. The bank increased its SME business, boosted loan and deposit volumes, launched mobile banking applications and installed new ATMs at all branches. It also contributed to the community through its Bright Future philanthropic and sponsorship program, and the Scotiabank Barbados Foundation. The bank achieved a 79% score in its annual measurement of employee engagement, with most employees strongly believing that the institution values their contribution.

In a country with just 300,000 inhabitants, Belize Bank remains a big fish in a rather small pond. It is the largest full-service banking operation in Belize. However, with an increase in tourism and interest in its commodities, Belize has appeared on investors’ radars. Belize Bank is the best poised among the country’s five financial institutions to satisfy their needs, as well as those of local customers. It maintains correspondent banking relationships with Bank of America and Royal Bank of Canada, among others. It also has a broad product offering, including merchant services, online banking, international bank accounts in several currencies, trust services and securities brokerage operations. The bank traces its history to 1902, and maintains the country’s largest branch network.

Banco de Crédito de Bolivia continued to operate under challenging economic and political conditions that threatened to weaken investor and consumer confidence, though the bank managed to post healthy returns, compared with competitors. The good news came despite rumors in 2010 that the bank was nearly bankrupt. During the first 11 months of 2011, operating revenues rose 5.4% year-on-year, ROE went from 15.5% to 15.6%, and its net profit margin rose from 16.8% to 17.85%. Moody’s upgraded the bank’s long-term global currency deposits from Ba3 to Ba1 in early 2011. Its corporate social responsibility (CSR) efforts included an ongoing commitment to an organization that treats harelips in children, to educational programs to teach mathematics, and to environmental initiatives. The bank has also expanded its outreach to SMEs.

In 2011, Itaú Unibanco completed the merger of Banco Itaú and Unibanco and became the world’s eighth-largest bank by market value, up from tenth in 2010. Profits rose 45% from those posted two years earlier. Itaú Unibanco has 23 million retail customers, 58 million credit and debit cardholders and 1.5 million business clients. In 2011 it launched a 100% electronic checking account. It also opened 123 branches, bringing its network of service locations to 4,701, and acquired a 49% stake in Banco Carrefour, which operates through the French retailing giant’s Brazilian stores. Itaú Unibanco has operations in the Americas, Europe and Asia.

Spanish firm Santander’s Chilean unit is the country’s largest bank by assets. With $47 billion in assets in 2011, it accounted for a 19.5% market share. The bank also holds a 25% share of the retail market and an 18% share of the corporate market. Retail loans grew 10.2% year-on-year in 2011, when client deposits also rose by 29.2%. With 499 branches and 1,920 ATMs, Santander operates the largest financial distribution network in Chile. In 2011 the bank reported ROE of 22% and an efficiency ratio of 38.4%. While deciding to increase its focus on retail banking, the bank has also boosted its support of small and medium-size enterprises, opening a special service center for them.

Bancolombia’s distribution network already covers 65% of the country, and it is committed to reaching distant villages and rural communities. It increased its market share of loans from 22.6% in 2010 to 23% in 2011, when it also increased its share of deposits from 19.4% to 19.8%. It increased its credit card issuance by 18% year-on-year, compared with 14% growth for the sector. Bancolombia’s nonperforming loan ratio for individuals and small and medium-size enterprises fell from 5.6% in 2010 to 4.3% in 2011. In addition to its Colombian bank, the Bancolombia Group operates banks in El Salvador and Panama, as well as a leasing unit in Peru. The Group has 952 branches and 3,333 ATMs.

Since entering the Costa Rican market in 1995, Scotiabank has sought to differentiate itself from its competitors. In 2011 the bank upgraded its online banking platform to improve functionality and increase security. It opened two new branches and transferred three others, bringing its total network to 39 branches and 19 business points of service. The bank also added 16 new ATMs, for a total of 126 units nationwide. It also launched its new Portfolio Advisory Group to provide asset and portfolio management advice. Scotiabank continued to contribute to school sports programs and environmental initiatives, while also encouraging its employees to volunteer for a variety of community projects and events.

Banco Popular Dominicano (BPD) remained the Dominican Republic’s banking powerhouse in 2011, attracting more than 260,000 new clients and gaining an AA- rating from Fitch and Feller Rate. Despite a complex operating environment in which banks were adversely affected by increased taxation and decreased credit demand, BPD saw total loans rise by 16% year-on-year, with a strong focus on corporate clients and small and medium-size enterprises. Deposits and assets also rose by 14% and 15%, respectively. Its NPL ratio improved by 0.4% to 1.4%. BPD operates more than 680 ATMs and 200 branches nationwide and has increased its social media presence to improve customer interaction.

Pichincha not only services its clients throughout Ecuador but also supports Ecuadorian communities abroad. In 2010 the bank established operations in Spain, home to a large population of Ecuadorian immigrants, and it plans to open new offices there to expand its coverage. It also has operations in Peru, Panama and Colombia, as well as a Miami agency. In Ecuador, Pichincha has a network of 487 branches and offices, as well as more than 720 ATMs, located in all of the country’s provinces. Strategic alliances with other companies allow the bank to expand its services, to include Diners Club (credit cards), Nova Ecuador (insurance) and Autodelta (car dealerships), among others. Many of its CSR activities are managed by its Crisfe Foundation.

Founded in 1955 and part of Colombia’s Bancolombia Group since 2006, Banco Agrícola posted a record net profit of $110.4 million in 2011, a year-on-year increase of 45.8%. The bank continued to enjoy strong customer loyalty and brand recognition throughout El Salvador, giving it an estimated 30% market share of loans and deposits and making it the country’s largest commercial bank. The bank maintains more than 600 service points throughout the country and is a market leader in remittance services for Salvadorans abroad sending funds back home. Its strong balance sheet allowed Banco Agrícola to continue its commitment to corporate social responsibility investments, focused on computer centers, school libraries, environmental programs, cultural activities, financial education and support for an annual telethon.

Banco Agromercantil celebrated its 85th anniversary in 2011, when it remained the Guatemalan market’s star performer. The bank’s 5% year-on-year net profit growth, to $18.8 million, and 20% increase in its loan portfolio presented the highest growth rates in the country’s financial system. Assets also rose by 18%, to $1.74 billion. ROE was 14.2% and ROA was 1.2%, Agromercantil continued to enjoy high customer satisfaction ratings, helping to expand its customer base by 9.9% to more than 1.1 million clients in 2011. Customers are serviced through a nationwide network of 234 branches and 180 ATMs. The bank, which posted a 17% increase in deposits, also launched several new products, including a low-interest mortgage credit and an innovative credit trust service.

Banco Atlántida, Honduras’s largest and oldest bank, made a strong push to support green investments in 2011, providing loans to local SMEs launching green projects. In response, the bank received a $20 million loan from the Inter-American Development Bank to expand its environmentally sustainable credit portfolio. Part of the broader Grupo Atlántida financial consortium, the bank serves more than 400,000 customers through its network of over 180 branches and service centers nationwide. Banco Atlántida, founded in 1913, was the first bank in Honduras authorized by the government to issue local currency banknotes and has continued to contribute to the country’s economic development since then.

Scotiabank Jamaica is one of the island’s largest banking institutions, with $326 million in assets as of October 2011. Operating within a difficult economic environment, including weak corporate loan demand despite record-low interest rates, the bank saw only a slight 1% year-on-year decline in net profit in 2011, when ROE was 17.6% and ROA 3.1%. The bank operates a network of 50 branches and 222 ATMs, serviced by 2,335 employees. Scotiabank Jamaica is targeting underserved segments. It introduced Visa-branded debit cards, created a Capital Markets unit and launched a microfinance operation. It supported several health, education and community projects in Jamaica while continuing an employee volunteer program introduced in 2004.

Banamex, Citigroup’s Mexican unit, continued to be a leader in CSR investments in 2011. The bank focused its initiatives on preserving Mexican culture, protecting the environment and improving financial education, among other areas. It launched a new SME website with benefits and financial tools. Banamex remained profitable amid Mexico’s challenging economic environment. Net income rose 33% year-on-year, with the bank increasing its provisioning to shield itself from market volatility. Though outstanding loans rose 22%, to more than $31 billion, its NPL ratio was only 1.5%.

Founded in 1991, Lafise Bancentro is Nicaragua’s second-largest bank. According to Fitch, which gave it a local rating of “A” in 2011, the bank holds a 25% market share of the country’s banking sector assets, as well as 23% of loans and 25% of deposits. About 70% of its clients are corporations. Nevertheless, the bank offers a portfolio of retail services through its nationwide branch network. It is part of Lafise Holdings, which has operations throughout Central America, Colombia, Dominican Republic, Mexico, Spain and Venezuela. The bank’s CSR efforts are managed through its Zamora Teran Foundation, including support of a One Laptop Per Child initiative.

Banco General set an important milestone when it became Panama’s first privately owned bank in 1955. It remains the country’s largest locally controlled private bank more than a half century later. In 2011, Banco General held a dominant 25.9% market share of total private sector deposits and an 18.5% share of loans in Panama. Its market capitalization rose 34.6% in 2011, to $4.1 billion, when net income rose 16% to $266.1 million. The bank, which has been investment-grade-rated by both Fitch (BBB+) and S&P (BBB-) since 1997, serves its 525,000 customers through a network of 60 branches and 290 ATMs throughout Panama. It also has banking operations in Costa Rica. In 2011 it contributed $3 million to support 194 nonprofit organizations.

Itaú Unibanco Paraguay increased its support to SMEs and farmers. The bank received a $40 million credit from the IFC and OPEC Fund for International Development in 2011 to boost lending to the segment. It is the first Paraguayan bank to sign a master agreement with Brazil’s BNDES development bank to finance capital goods imports from Brazil.

Operating within one of Latin America’s best-performing economies in 2011, BBVA Banco Continental continued its market leadership position. It held a 23.9% share of the Peruvian loan market, 23.3% of deposits and had an ROE of 34.3%, the highest for any Peruvian bank. It increased its branch network by 11.3% to 265 branches. Fitch upgraded its long-term local currency issuer default rating in 2011 from BBB+ to A-, with a positive outlook.

Banco Santander Puerto Rico continued to implement winning strategies that allowed it to remain profitable, despite the island’s six-year economic recession. It posted net income of $41 million in 2011, at a time when many other banks were struggling to stay afloat. With the economy showing signs of a gradual recovery, the bank positioned itself to contribute to growth by supporting SMEs. Despite the worrisome economic environment, Santander remained the only bank on the island to serve all market segments.

Though working within a flat economy and difficult sociopolitical climate in Trinidad & Tobago, Scotiabank’s prudent approach and successful business model allowed it to maintain profitability in 2011. Net income rose 6.9%, the same rate at which earnings per share also increased. The bank also reported growth in both deposits and total assets, posting a return on assets of 3.3% and ROE of 20.7%.

Although Turks & Caicos continued to be adversely impacted by the challenging international environment, Scotiabank revised its strategic plan and aligned its goals and objectives to remain profitable. Net profits rose 0.9% year-on-year in 2011, to $10.5 million. Assets fell by 0.4%, to just over $428 million, while Tier 1 capital rose 16.2%, to $75.2 million. The bank remained the largest lender in the Turks & Caicos, with a 57% share of the retail loan market, up from 56% in 2010 and 51.4% in 2009.

Banco Santander’s Uruguayan subsidiary faced important challenges in 2011, with attributable profit declining 70% year-on-year to $28 million. However, the bank retained its leadership position among private banks in Uruguay by driving its retail business, adding new products and growing its corporate client base. The operation also benefited from a strategic alliance between Santander and insurer Zurich to develop their insurance business in several Latin American markets, including Uruguay. Santander Uruguay maintained an 18.6% share of Uruguay’s loan market, and a 16% share of savings. Customer satisfaction was 83.7%. The bank continued to focus much of its CSR activity on supporting higher education, including programs for underprivileged students and the disbursing of mobility grants for local students to study abroad.

Spanish banking group BBVA’s Venezuelan subsidiary was able to overcome a complex sociopolitical climate in 2011, which included government threats to expropriate the bank. BBVA Banco Provincial remained the country’s third-largest private sector bank. It also operated Venezuela’s largest banking distribution network, with 315 branches and 1,042 ATMs throughout the country. At June 2011, ROE was 43.9% and ROA was 4.9%. The bank’s ongoing success was based on its focus on improving its client service standards, as well as solidifying its productivity and efficiency ratios. BBVA managed to reduce credit card fraud in its operations by 46%. The bank also maintained an active CSR program, much of which focused on art, education, culture, sports and the development of social entrepreneurs.